Some economists say the plan will help millions of borrowers in financial distress and prevent the housing market from total collapse.

The purpose of the lending plan would to prevent as many as 9 million Americans from losing their homes to foreclosure.“In the end, all of us are paying a price for this mortgage crisis,” said Obama, “and all of us will pay an even steeper price if we allow this crisis to deepen.”

The plan would allow up to 4 million borrowers facing foreclosure to get reduced payments through joint efforts by lenders and the US Treasury.

An additional 5 million, who may not qualify for conventional refinancing if their home values have dropped, could refinance through housing finance companies Fannie Mae and Freddie Mac.

The Associated Press reports that “Government support pledged to mortgage giants Fannie Mae and Freddie Mac is being doubled as well, to $400 billion, as part of an effort to encourage them to refinance loans that are "under water" — those in which homes' market values have sunk below the amount the owners still owe.”

While the President's lending plan will help the economic crisis as a whole, he also addressed the trouble it is causing individual families.

“The American Dream is being tested by a home mortgage crisis that not only threatens the stability of our economy but also the stability of our families and neighborhoods,” he said. “While this crisis is vast, it begins just one house and one family at a time.”

Lending Plans and Rates

President Obama’s lending plan calls for modified and adjustable rates. For many young adults looking to purchase a home, these contractual conditions may be confusing.

A modified rate will change some terms from an original mortgage plan and allow borrowers to get a fixed rate on a 15 or 30 year term at today’s rates.

An adjustable rate is formula based, and adjusts according to banks and market conditions.

2 comments:

I think there are valid arguments on both side about this government plan. Will it raise the budget deficit? Probably. Will it help? That’s a good question. I think economies go through cycles and this might be one of them. I read a good article on recessions and their history on